US-based private equity firm New Enterprise Associates Inc. (NEA) is betting big on the Indian healthcare story as it eyes investments in specialty hospital chains. Globally, nearly 40% of its total assets under management of $11 billion is invested in healthcare-related sectors and it proposes to attach a similar significance to its play in India.

As reported by VCCircle earlier, NEA, which had raised a $2.5-billion global fund in January, may allocate 15% of this fund to India investments.

NEA announced its investment in Nova Medical Centers, a specialised daycare surgery chain, only last month. It is learnt that the firm is evaluating investment deals in the range of $10-$50 million in smaller hospital chains across Indian states.

Bala Deshpande, senior managing director who heads NEA's India office and former ICICI Venture veteran, said, "In a few lifestyle diseases such as diabetes, cardiac disease or cancer, India remains in the top slot with the largest pool of patients. However, the availability of quality treatment is comparatively lesser in tier III or rural areas. We see tremendous potential in those areas and are evaluating those opportunities."

According to a KPMG study, the Indian healthcare industry is projected to grow by an average of 5.8% per annum between 2009 and 2013 taking the total expenditure in 2013 to $14.2 billion. The availability of hospital beds in India lags behind at just over 0.7 against a world average of four beds per 1,000 people. Growing income levels and shift in disease profile from chronic to lifestyle diseases will further enhance the growth, KPMG study said.

This year, apart from NEA's Nova deal, three more were struck in the hospital space. International Finance Corp has invested $25 million in Max Healthcare Institute, GIC Special Investments Pte Ltd invested in Fortis Healthcare ($85 million) and India Build-Out Fund I in Healthcare Global Enterprises Ltd ($6.75 million). According to VCCEdge data, since 1996, about 132 PE deals were inked in the Indian pharma & healthcare space with an overall deal value of $2.47 billion.

According to Abhishek Sharma, VP and head (Lifesciences), MAPE Advisory Group Private Limited, nearly 95% of Indian hospitals belong to the smaller category with less than 100 beds. He predicts two types of PE investments. In metros, hospitals with bed capacity of over 100 could be potential targets as these can be scaled to 500 beds with an enterprise value of Rs 1 crore per bed. Such an asset can be taken to the IPO route offering an exit to the PE investors. Second, in regional and tier II cities, where growth rate is comparatively less, the M&A and consolidation route would offer an exit path, he adds.

Apart from healthcare, NEA is also keen on sectors such as education and waste management. NEA closed three deals in 2009 with $13-million investment in reverse logistics player RT Outsourcing, $60 million with Jacob Ballas Capital in electronic payments processing firm Financial Software & Systems and $6 million in ValueFirst Messaging, a Delhi-based mobile messaging services provider.

Back in 2006, when NEA did not have a direct presence in India, it backed an affiliate fund named NEA-IndoUS Ventures. This $189-million fund, which was started by Vinod Dham of Intel chip fame with Vani Kola and Kumar Shiralagi, has now been rebranded as IndoUS Ventures. While IndoUS continues to look at early stage opportunities of sub-$10 million, NEA would look at deals with sizes in excess of $10 million.